Life Settlements have quickly been gaining popularity as an alternative asset class, especially since the recent financial disasters on Wall Street, the “great recession of 2008”, government bailouts, and the recent stock market and mortgage meltdown. Without ties to the stock market, the Life Settlement market has already grown to a $20 billion dollar industry, and Bernstein Research predicts this industry will continue to grow into an astonishing $160 billion market within the next few years.

Life Settlements have been primarily utilized at the institutional level by various entities, including, pension plans, hedge funds, institutional investors, banks, and insurance companies. Even world class investor, Warren Buffett trusts Life Settlements, investing over $400 million through his company, Berkshire Hathaway. Through fractionalizing policies, individual accredited investors can now capitalize on this alternative asset class and investment strategy at various levels of participation. Life Settlements are in essence acquiring a portion of the beneficiary rights, (death benefit) to a life insurance policy. This alternative asset class is the ultimate defensive strategy against a rogue stock market correction, as the return is not affected by the economy or stock market volatility, rather it is protected by contractual obligations of “A” rated or better, as rated by Standard & Poor’s, insurance companies.

This alternative asset class is now available to investors, both individual and institutional, by Durand Financial, Inc. and their partnership with major institutional trust companies, which also enables investors to purchase a fractional interest, or percentage of various policies. Investors have the option of using non-qualified money, or qualified retirement accounts such as a self-directed IRA, to fund their portfolio.

Durand Financial Inc.’s investment platform using Life Settlements, offers safety and security with this alternative asset class.

Although the date of payout is fairly predictable based upon projected life expectancies,(ranging from approximately 3-6 years), determined by two independent actuaries.  Life Settlements have had historical returns averaging around 12% since 2001. This is similar to the historical returns on equities, which has averaged just over 12% since 1925.

To learn how you can better protect your  portfolio, without any risk from the stock market or unknown economic factors, simply fill out the contact form on the right and learn how to protect your retirement savings from economic disaster or looming stock market correction. You’ll also receive a free report titled, Life Settlements – Predictable Profits in an Uncertain Economy. Life Settlements are an alternative asset class only available to accredited investors.

The Biggest Stock Market Boom in History

Even though the stock market is known for volatility, it didn’t appear so risky in the 1920s. The economy was thriving, and the stock market seemed like a logical investment strategy.

Wall Street quickly attracted a lot of investors. As more people invested, stock prices began to rise. The sudden spike in price first became noticeable in 1925. And then between 1925 and 1926, stock prices started to fluctuate. 1927 brought a strong upward trend, or bull market, which enticed even more people to invest. By 1928, the market was booming.

This booming market completely changed the way investors perceived the stock market. No longer were stocks viewed as long term investments, rather a quick way to become rich. Stock market investing had become the talk of the town, from barber shops to parties. Stock market success stories could be heard everywhere, newspapers and other forms of media reported stories of ordinary people – like teachers, construction workers, and maids, quickly getting rich quick off the market. Naturally this fueled the desire among the general population to invest.

Many newcomers wanted in, but not everyone had the money. This in turn led to what is known as buying on margin. Buying on margin meant that a buyer could put down some of their own money, and borrow the rest from a broker/dealer. In the 1920s, a buyer could invest 10-20% of their own money and borrow the remaining 80-90% to cover the stock price.

Now, buying on margin could be a risky endeavor. If the stock price dropped below a certain amount, the broker/dealer would issue a margin call. This meant the investor needed to come up with cash to repay the loan immediately, which often meant selling the underperforming stock.
In the 1920s, many people were buying stocks on margin. They seemed confident in the booming bear market, but many of these speculators neglected to objectively evaluate the risk they were taking and the probability that they might eventually be required to come up with cash to cover the loan to cover a call

The Calm before the Financial Storm

By early 1929, people across the country were rushing to get their money into the market. The profits and road to wealth seemed almost guaranteed and so many individual investors were putting their money into various companies stock offering. Sham companies were also set up with little federal or state oversight. What’s worse – even some unscrupulous bankers were using their customers’ money to buy stocks – and without their knowledge or consent!

While the market was climbing, everything seemed fine. When the great crash hit in October, many investors were in for a rude awakening. But most people never noticed the warning signs. How could they? The market always looks best before a fall.

For example; on March 25, 1929, the stock market took a mini-crash. This was a mere preview of what was to come. When prices dropped, panic set in throughout the country as margin calls were issued. During this time, a banker named Charles Mitchell announced his bank would continue to make loans, thus relieving some of the panic. However, this wasn’t enough to stop the inevitable crash as fear swept across the nation like a raging wildfire.

By spring of 1929, all economic indicators pointed towards a massive stock market correction. Steel production declined, home construction slowed, and car sales dwindled.

Similar to today, there were also a few reputable economists warning of an impending, major crash. But after several months without a crash in sight, those advising caution were labeled as lunatics and their warnings ignored.

The Great Summer Boom of 1929

In the summer of 1929, both the mini-crash and economists’ warnings were long forgotten as the market soared to all-time historical highs. For many, this upward climb seemed inevitable. And then on September 3, 1929, the market reached its peak with the Dow closing at 381.17.

Just two days later, the market took a turn for the worst.

At first, there was no major drop. Stock prices fluctuated through September and October until that frightful day history will never forget – Black Thursday, October 24, 1929.

On Thursday morning, investors all over the country woke up to watch their stocks fall. This led to a massive selling frenzy. Again, margin calls were issued. Investors all over the country watched the ticker as numbers dropped, revealing their financial doom.

By the afternoon, a group of bankers pooled their money to invest a sizable sum back into the stock market, thus relieving some panic and assuring some to stop selling.

The morning was traumatic, but the recovery happened fast. By the day’s end, people were reinvesting at what they thought were bargain prices.
12.9 million Shares were sold on Black Thursday. This doubled the previous record. Then just four days later, on October 28, 1929, the stock market collapsed again.

The Worst Day in Stock Market History

Black Tuesday, October 29, 1929, was the worst day in stock market history. The ticker become so overwhelmed with ‘sell’ orders that it fell behind, and investors had to wait in line while their stocks continued to fall. Investors panicked as they couldn’t sell their worthless stocks fast enough. Everyone was selling and almost no one buying, thus the price of stocks collapsed.

Instead of bankers attempting to persuade investors to buy more stocks, the word on the street was that even they were selling. This time over 16.4 million shares were sold, setting a new record.

Stock Market Freefall

Without any ideas on how to end the massive panic that gripped society, the decision to close the market for a few days was made. On Friday, November 1, 1929, the market closed. The market reopened again the following Monday, but only for limited hours, and then the price of stocks dropped again. This continued until November 23, 1929, when prices appeared to stabilize. But the bear market was far from over. During the next two years, stock prices steadily declined. Finally, on July 8th, 1932, the market had reached its lowest point when the Dow closed at 41.22.

In 1933 Congress Introduces the Glass-Steagall Act

In the midst of a nationwide commercial bank failure and the Great Depression, Congress members Senator Carter Glass (D-VA) and Representative Henry Steagall (D-AL) inked their signatures to what is today known as the Glass-Steagall Act (GSA). The GSA had two main provisions; creating the FDIC and prohibiting commercial banks from engaging in the investment business.

The Glass-Steagall Act was eventually repealed during the Clinton Administration via the Gramm-Leach-Bliley Act of 1999. Many financial professionals would have you believe the Glass-Steagall’s repeal contributed heavily to the financial crisis of 2008. And despite hard lessons once again learned, little was done by congress to restore public confidence and to reinstall safeguards or re-in act the Glass-Steagall Act. The lobbying pressure is just too much to overcome. Just like before the crash of 1929, again, there is no firewall between the major banks and investment firms and with little federal oversight. It’s a house of cards ready to fall once again.

However, Noble Prize Winner, Joseph Stiglitz of the Roosevelt Institute, had this to say:

“Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people’s money very conservatively. Investment banks, on the other hand, have traditionally managed rich people’s money — people who can take bigger risks in order to get bigger returns.”

The truth was that when the Glass-Steagall Act was repealed, it brought investment and commercial banks together for a profitable outcome. There was indeed a market for this style of high returns that required risk taking and high leverage. While some believe that repealing the GSA was a contributing factor of the 2008s financial crisis, one can’t help but wonder if the agency was actually hindering the competitive advantages of financial firms.

Allen Greenspan on Irrational Human Behavior in the Stock Market

Allen Greenspan, former Federal Reserve chairman stated in his new book, The Map and the Territory, they did all the economic mathematical calculations during his tenure, but failed to take into account irrational human behavior patterns triggered by strong emotions of fear and panic or desire for gain, which apparently run rampant in the stock market. The flip side of that is euphoria that can drive the market up to unrealistic highs, like now.

Since the financial crash of 2008, Greenspan stated he has been thinking a lot about bubbles. He has been trying to figure out why he along with so many other economic forecasters didn’t see the housing bubble that caused the crisis. Today, another housing bubble exists in China far greater in magnitude than any other country, and according to economist, Harry Dent, it’s a ticking time bomb poise to create economic havoc around the world when it detonates.

The Approaching Baby Boomer Retirement Bubble (2013 – 2015)?

Consider that 401(k) retirement plans are relatively recent platforms. They were first introduced in the early 1980’s and have primarily been funded by the baby boomer generation, which has driven stock prices to current levels.

As of 2013, baby boomers are retiring at the rate of about 10,000 per day. In most cases this means they are no longer working, or contributing to their plans and will be withdrawing from their 401(k) plans, likely already rolled over into Individual Retirement Plans. Could this massive retirement wave put us on the forefront of a record-shattering stock market correction as the last of the baby boomers move into retirement?

High-profile world economist, Harry Dent, most famous for his predicting Japan would suffer a financial correction lasting over a decade; has been publishing this research for years. He not only carefully analyses economic data, but demographic data as well.

Dent’s theory of a “baby boomer retirement wave” presents a disturbing reality. With 10,000 baby boomers spending and cashing in on their retirement accounts every day, these numbers suggests that the U.S. is heading down a dangerously similar slope as Japan years ago.

Dent’s research shows that when consumers age, their spending patterns change. For example; when baby boomers were starting families, they spent more and the economy flourished. When their children grew and left home, the boomers starting spending less, which led to a decline in the economy.

The same thing happened in Japan, when the working-age population peaked in 1995.

Dent predicts by 2015, we will see a similar scenario here in the United States, when there is a disproportionately high number of older people and a much smaller population of young productive people. With fewer people working and a larger segment of the population in the older age bracket, taxes will most likely have to increase for all segments of our population

Indeed the financial devastation the stock market crash inflicted on the economy in 1929 is almost unthinkable. A great majority of people lost their entire savings. Businesses went bankrupt, and peoples’ faith in banks was shattered. Some people jumped to death off of high rises after they lost their savings and were wiped out financially. Some banks went broke also, and people lost the money they had deposited in banks.

Banks foreclosed on numerous businesses and family farms. You couldn’t buy a job! Soup lines formed in major cities because no one had anymoney, there were no jobs to have, or money to feed themselves or their families. Fights broke out due to the anger and frustration and dire circumstances.

While certain regulations have added a layer of protection since then, like the federal deposit insurance of accounts up to $100,000. the stock market keeps its risky reputation. The truth is that another crash of a similar magnitude could be right around the corner as the baby boomer generation moves into retirement. The smartest thing an investor can do now is simply understand the shift that the market and economy is going through in order to profit from it.

Alternative Asset Classes Gain Popularity in Spite of Sluggish U.S. Economy

When institutional investors and billionaires like Warren Buffett start adjusting their portfolios and start selling various U.S stock positions it’s wise to pay attention. They are careful financial analyst and try to project and re-position themselves at all times. And, they are usually far ahead of the market in doing so. Even more important is finding out just what alternatives they’re using to grow their wealth. For example, Buffett has a thriving company, Berkshire Hathaway, and likes to add stability to his portfolio buying Life Settlement contracts, (an alternative asset class) for a total of $400 million dollars’ worth.

Major brokers and financial institutions generally don’t offer their clients information on these types of investment alternatives, and for a variety of reasons. In fact, less than 15% of financial professionals are even familiar with this asset class.

Since Life Settlements are insurance contracts with no ties to the market or economy, they offer individual investors a strategy to avoid a stomach turning stock market roller coaster ride and unpredictably of their hard earned dollars by offering double digit returns year after year.

As an investor, you can’t control the market or economy, but you can control your own personal economy. Learn how to safeguard your 401(k) or IRA from a looming stock market correction. Simply fill out the form below and register for a no cost or obligation portfolio review from Durand Financial. You’ll also receive a free report titled, Life Settlements – Predictable Profits in an Uncertain Economy. Life Settlements are an alternative asset class only available to accredited investors.

First, Life Settlements are normally large insurance contracts, ( usually, with a death benefit of $1,000,000 or more, typically $5,000,000. or $10,000,000), which have been offered for sale for a number of reasons. For example, perhaps, a married couple has one of the spouses insured for $5,000,000 with a whole life policy that has been in force for many years and has accumulated a nice cash value. Now, let’s also suppose that suddenly one of them is struck with a major health issue requiring very expensive medical treatment, and, far beyond the family financial resources. So, what are the options? First, they could just stop paying premiums on the policy and it will expire when the policy is no longer supported. Secondly, they could withdraw the cash value, which is normally only a small percentage of the amount of premium dollars contributed, or, the third alternative is to offer the policy for sale. This option normally yields four to five times more than the cash value which makes it good for the seller and the trust company that buys it.  Trust companies typically are interested in purchasing these as part of their portfolio as, (1) They are normally highly rated policies which make the payout very predictable, and (2) The return on the amount contributed are usually quite good offering a fairly high return for the dollars contributed to buy the policy,  using a narrow selection criteria.  Historically, this asset class has had a historical rate of return of around 10 to 12% percent since 2001.

  You might ask, why didn’t my broker, financial adviser or money manager ever tell me about this? The reason being, is because major brokerage firms are not interested in this asset class for a number of reason too numerous to list here, and, primarily because it only known by about 15% of the financial services sector. Since it’s an alternative asset class, it’s but a small segment of the financial service dollars here in the U.S. market. However, biggest reason is because historically it’s only been available to institutional type investors until recently when some trust companies have packaged these products to make them available to individual investors both for qualified accounts, (IRA’s, 401k’s) and non qualified accounts.  Primarily positioned for accredited investors or high net worth individuals, make it beyond the reach of the average investor

  To learn more about this alternative asset class simply fill out the form to the right for your free report.

Welcome to my all new web site still in the developmental stage. I have had my own web site for about ten years or so, and I must say, over those years I have learned so much as the level of technology has been moving at warp speed, hasn’t it? But, this is a new transition for me personally as well as professionally. First, I became familiar with Microsoft, Front Page for accessing and managing my web site. I received a Beta copy of Office 98 way back when. Later, I upgraded to Office 2000 and used that for many years as well. Then, last year, I upgraded to Office 2010, each time having to adjust and become familiar with the all new format. Since Microsoft does not provide Front Page any longer, I used the old version that I had for many years until recently, when I switch to WordPress. I am discovering and learning this new program and how it works. And, I have never “blogged” before so this is a new experience for me as well.

Sometimes, I think of blogging with a negative connotation. Why? I don’t know, I just do and perhaps a result of my mindset that has been influenced by a lot of negative content and without a lot of substance that has been posted over the years. One site in particular, is owned by an acquantance of mine who always seems to have an axe to grind about one thing or another, and, usually in a negative tone of voice. I think he must wake up in the morning angry, and go to bed at night angry as well. I suppose it’s post like that which help to form my mindset.

I don’t really want to get involved in writing a lot of negative content. Instead, I’d like to provide the reader with a lot of value and wisdom as well. Both items in short supply these days, don’t you think?

July 25th, 2013

Life Settlements, An Alternative Asset Class

After years of having worked in the financial service sector working with major brokerages, truth be told, I was never introduced to an alternative asset class know as Life Settlements. It’s an asset class that has been around for many years, but primarily incorporated into major banks, insurance companies and industrial type portfolios. Warren Buffet, and his company, Berkshire Hathaway, have been particpating in this asset class for many years to haul in double digit returns year in and year out without any ties to the stock market. So, how does all of this work and why haven’t you heard about it you might ask?

  First, Life Settlements are normally large insurance contracts, ( usually, with a death benefit of $1,000,000 or more, typically $5,000,000. or $10,000,000), which have been offered for sale for a number of reasons. For example, perhaps, a company carried a large key man insurance policy on one of it’s valued executives and now years later no longer needs or wants to continue to fund the policy. So, what are the options? First, they could just stop paying premiums on the policy and it will expire when the policy is no longer supported. Secondly, they could withdraw the cash value, which is normally only a small percentage of the amount of premium dollars contributed, or, the third alternative is to offer the policy for sale. This option normally yields four to five times more than the cash value which makes it good for the seller and the trust company that buys it.  Trust companies typically are interested in purchasing these as part of their portfolio as, (1) They are normally highly rated policies which make the payout very predictable, and (2) The return on the amount contributed are usually quite good offering a fairly high return for the dollars contibuted to buy the policy,  using a narrow selection criteria.  Historically, this asset class has had a rate of return of around 14 percent since 2001.

  You might ask, why didn’t my broker, financial advisor or money manager ever tell me about this? The reason being, is because major brokerage firms are not interested in this asset class for a number of reason too numerous to list here, and, primarily because it only known by about 15% of the financial services sector. Since it’s an alternative asset class, it’s but a small segment of the financial service dollars here in the U.S. market. However, biggest reason is because historically it’s only been available to institutional type investors until recently when some trust companies have packaged these products to make them available to individual investors both for qualified accounts, (IRA’s, 401k’s) and non qualified accounts.  Primarily positioned for accredited investors or high networth individuals, may make it beyond the reach of the average investor

   To learn more about this alternative asset class simply fill out the form to the right for your free report.